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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10 K-SB
(Mark One)
[X] Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 (Fee Required) For the fiscal year ended December 31, 1998
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange act of 1934 (No Fee Required). For the transition
from _________to____________
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COMMISSION FILE NO. 0-20120
TMP INLAND EMPIRE VII, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0416043
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 N. PARKCENTER DRIVE, SUITE 235 92705
SANTA ANA, CALIFORNIA (Zip Code)
(Address of principal executive office)
(714) 836-5503
(Registrant's telephone number, including area code)
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered pursuant to Section 12 (g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days Yes [X] No. [ ]
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PART I
ITEM 1(A). BUSINESS
INTRODUCTION
TMP INLAND EMPIRE VII, LTD., a California Limited Partnership (the
"Partnership"), is a California limited partnership formed in July 1990, of
which TMP Investments, Inc., a California corporation, and TMP Properties, a
California general partnership, are the General Partners (the "General
Partners"). The Partnership was formed to acquire, from nonaffiliated persons,
parcels of unimproved real property (the "Properties") located primarily in
Riverside and San Bernardino Counties, California. Some of the Properties are or
will be planned, zoned and mapped for single family residential purposes, while
others are or will be planned, zoned and mapped for commercial or industrial
uses. Actions by the Partnership to obtain the desired general/specific plan,
zoning and parcel/tract map changes by or approvals of governmental entities,
and to subdivide and site plan, are commonly referred to as "pre-development."
The Properties will be held for investment, appreciation, and ultimate sale
and/or improvement of all or a portion thereof either alone or in conjunction
with a joint venture partner. If the Properties or portions thereof are
developed, the Partnership intends to hold and manage the same for the
production of income until such time that they determine a sale would be in the
best interests of the Partnership and its limited partners (the "Limited
Partners"). Upon the sale of the last Property, the payment of all debts and the
distribution of any remaining proceeds, less necessary reserves, to those
persons entitled thereto pursuant to the Partnership's Agreement of Limited
Partnership (the "Partnership Agreement"), the Partnership will be dissolved.
TMP Inland Empire VII, Ltd., a California Limited Partnership, has been formed
under the Revised Limited Partnership Act of the State of California. The rights
and obligations of the Partners in the Partnership are governed by the
Partnership's Agreement of Limited Partnership (the "Partnership Agreement").
The following statements concerning the Partnership Agreement are qualified in
their entirety by reference to the Partnership Agreement, which has been filed
as as Exhibit to Form 10-K.
DESCRIPTION OF LIMITED PARTNERSHIP UNITS. The Partnership Agreement authorizes
the issuance and sale of Limited Partnership Units for all cash in multiples of
$1,000 per Unit. Between July 20, 1990 and December 31, 1992, the Partnership
sold a total of 8,700 Limited Partnerships Units. As of December 31, 1998, all
Units are outstanding and it is not anticipated that any additional Limited
Partnership Units will be issued in the future.
Outstanding Units are fully paid and nonassessable.
THE RESPONSIBILITIES OF THE GENERAL PARTNERS. The General Partners have the
exclusive management and control of all aspects of the business of the
Partnership. On April 1, 1998, PacWest entered into a management, administrative
and consulting agreement (the Management Agreement) with the general partners of
the Partnership to provide the Partnership with overall management,
administrative and consulting services. PacWest currently contracts with third
party service providers to perform certain of the financial, accounting, and
investor relations services for the Partnership. The General Partners may, in
their absolute discretion, acquire, mortgage, encumber, hold title to, pledge,
sell, release, or otherwise dispose of real property and interests therein when
and upon such terms as they determine to be in the best interest of the
Partnership and employ such persons, including, under certain circumstances,
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Affiliates of the General Partners, as they deem necessary for the efficient
operation of the Partnership. It is provided, however, that the Limited Partners
holding, in aggregate, more than 50% of the then outstanding Units must consent
to the sale of substantially all of the assets of the Partnership other than a
sale occurring in the ordinary course of the Partnership's business. The General
Partners shall receive only such compensation as is provided in the Partnership
Agreement.
LIABILITIES OF LIMITED PARTNERS/NONASSESSABILITY OF INTERESTS. A Limited
Partner's capital contributed to the Partnership is subject to the risks of the
Partnership's business. Except as specifically provided in the Partnership
Agreement, he is not permitted to take any part in the management or control of
the business and he may not be assessed for additional capital contributions.
Assuming that the Partnership is operated in accordance with the terms of the
Partnership Agreement, a Limited Partner is not liable for the liabilities of
the Partnership in excess of his capital contribution and share of his
undistributed profits. Notwithstanding the foregoing, a Limited Partner is
liable for any Distributions made to him if, after such Distributions, the
remaining assets of the Partnership are not sufficient to pay its then
outstanding liabilities, exclusive of liabilities of Limited Partners on account
of their contributions, and liabilities for which recourse is limited to
specific Partnership assets.
The Partnership Agreement provides that the Limited Partners shall not be bound
by, or be personally liable for, the expenses, liabilities, or obligations of
the Partnership.
TERM AND DISSOLUTION. The Partnership will continue for a maximum period ending
December 31, 2021, but may be dissolved at an earlier date, if certain
contingencies occur. Prior to dissolution, Limited Partners may not withdraw
from the Partnership but may, under certain circumstances, assign their Units to
others. (See "Transferability of Units," below.) The contingencies whereby the
Partnership may be dissolved are as follows:
1. The withdrawal, adjudication of bankruptcy, dissolution, or death
of a General Partner, unless the remaining General Partner agrees
to continue the business of the Partnership, or if there is no
remaining General Partner, all the Limited Partners agree to
continue the business of the Partnership and elect, by unanimous
consent, one or more new General Partners to continue Partnership
business;
2. A Majority Vote of the total outstanding Units in favor of
dissolution and termination of the Partnership; or
3. The removal of a General Partner, unless the remaining General
Partner agrees to continue the business of the Partnership, or if
there is no remaining General Partner, a majority of the Limited
Partners agree to continue the business of the Partnership and
elect, by a Majority Vote of the total outstanding Units, one or
more new General Partners to continue the Partnership business.
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VOTING RIGHTS OF LIMITED PARTNERS. The voting rights of the Limited Partners are
set forth in Section 6 of the Partnership Agreement. The Limited Partners have
the right to vote upon the following matters affecting the basic structure of
the Partnership:
1. Amendment of the Partnership Agreement (except for amendments which do
not affect the rights of the Limited Partners);
2. Removal of a General Partner;
3. Admission of a General Partner;
4. The sale of all, or a substantial part, of the assets of the
Partnership other than in the ordinary course of business;
5. The election to continue the business of the Partnership and the
appointment of a successor General Partner after the withdrawal,
adjudication of bankruptcy, death or dissolution of the sole
remaining General Partner;
6. The election to continue the business of the Partnership and
appointment of a successor General Partner after the removal of
the remaining General Partner; or
7. Termination and dissolution of the Partnership, other than after sale
of all of the Properties and receipt of all amounts due on any seller
carryback financing.
A majority Vote of the Limited Partnership shall be required for the matters set
forth above to pass and become effective, except for the matters specified in
Item 5, which shall require the unanimous consent of the Limited Partners.
The General Partners may at any time call a meeting of the Limited Partners or
for a vote, without a meeting, of the Limited Partners on matters on which they
are entitled to vote, and shall call for such meeting or vote following receipt
of written request therefor of Limited Partners holding 10% or more of the total
outstanding Units.
Each Limited Partnership Unit shall have equal voting rights.
TRANSFERABILITY OF UNITS. Holders of Units shall have the right to assign one or
more whole Units by written instrument the terms of which are not in
contravention of any of the provisions of the Partnership Agreement.
An assignee of record shall be entitled to receive Distributions from the
Partnership attributable to the Units acquired by reason of such assignment from
and after the effective date of the assignment of such Units to him; however,
the Partnership and the General Partners shall be entitled to treat the assignor
of such Units as the absolute owner thereof in all respects, and shall incur no
liability for allocations of Net Income, Net Loss, or Distributions, or
transmittal of reports and notices required to be given to Limited Partners
which made in good faith to such assignor until such time as written instrument
of assignment has been received by the Partnership and recorded on its books.
The effective date of an assignment of Units (of which assignment the
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Partnership has actual notice) on which the Assignee shall be deemed an Assignee
of record shall not be later than the first day of the fiscal quarter following
the date set forth on the written instrument of assignment.
Any assignment, sale, exchange or other transfer in contravention of any of the
provisions of the Partnership Agreement shall be void and ineffectual, and shall
not bind or be recognized by the Partnership.
An Assignee may only be substituted as a Limited Partner in the place of the
assignor Limited Partner with the prior consent of the General Partners. Any
substituted Limited Partner must agree to be bound by the provisions of the
Partnership Agreement.
BOOKS AND RECORDS. At all times during the term of the Partnership, the General
Partners will keep true and accurate books of account of all the financial
activities of the Partnership. These books of account are kept open for
inspection by the Limited Partners or their representatives at any reasonable
time. The General Partners may make such elections for federal and state income
tax purposes as they deem appropriate and the fiscal year of the Partnership is
the calendar year unless changed by the General Partners with the consent of the
Commissioner of Internal Revenue.
DISTRIBUTIONS, NET INCOME AND NET LOSS
ALLOCATION OF NET INCOME AND NET LOSS FROM OPERATIONS. Until such time that all
Limited Partners have received allocations of Net income from the Partnership
equal to a 6% cumulative, but not compounded, preferred return on adjusted
Capital Contributions (the "Preferred Return"), Net Income shall be allocated
99% to all Limited Partnership Units, which will be further allocated among such
Units on a pro rata basis, and 1% to the General Partners. Until such time that
all Limited Partners have received Distributions equal to their Capital
Contributions plus their Preferred Return, Net Losses shall be allocated 99% to
all Limited Partnership Units, allocated among them on a pro rata basis, and 1%
to the General Partners. Thereafter, Partnership Net Income, Net Loss, and all
items of Partnership deduction and credit shall be allocated 16.5% to the
General Partners and 83.5% to all Limited Partners, pro rata, according to the
number of Units owned. The foregoing allocations are subject to certain
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), as
set forth in Section 4.5 of the Partnership Agreement.
ALLOCATION OF PROFITS AND LOSSES ON SALES OF PROPERTY. Profits and Losses on
Sales of Property are allocated as set forth in Section 4.5(f) and 4.5(g),
respectively, of the Partnership Agreement.
DISTRIBUTIONS. Distributions of Distributable Cash from Operations, if any, will
be made annually within 90 days after the end of the Partnership's fiscal year
and shall be allocated 99% to the Limited Partners and 1% to the General
Partners until the Limited Partners have received cumulative Distributions in an
amount equal to their Capital Contributions plus their unpaid Preferred Return,
after which time Distributions of Distributable Cash from Operations shall be
allocated 83.5% to the Limited Partners and 16.5% to the General Partners.
Except for Distributions on Dissolution described in Section 8.2 of the
Partnership Agreement, Distributions of Cash from Sale or Refinancing of
Partnership Properties shall be distributed to the Partners at such times as the
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General Partners shall determine in the same manner as Distributions of
Distributable Cash from Operations. The General Partners have the right to use
Cash from the Sale of Refinancing of Partnership Properties to pay seller
financed debt without making a Distribution to Partners; provided, however, that
sufficient funds, if available, shall be distributed to the Limited Partners to
pay any resulting state or federal income tax, assuming that all such Limited
Partners are in a 28% tax bracket.
INVESTMENT OBJECTIVES; RISKS
In general, the investment objectives of the Partnership may be summarized as
follows:
(a) Preservation and return of the Partners' capital.
(b) Capital appreciation.
(c) Added value through pre-development activity (zoning, subdivision, etc.)
(d) Cash flow after return of capital.
(e) Minimization of risk by maintaining minimum partnership debt.
The General Partners are, at all times, guided by a policy of realizing profit
intended to result in gain for the Limited Partners upon ultimate disposition of
the Properties. There can, however, be no assurance or guarantee that the
decisions made by the General Partners will result in the realization of any
profit.
The Partnership is subject to the risks generally incident to the ownership of
real estate, including the uncertainty of cash flow to meet fixed or variable
obligations; adverse changes in national economic conditions; changes in the
investment climate for real estate investment; lack of geographic
diversification; adverse changes in local market conditions, such as changes in
the supply of, or demand for competing properties in an area; changes in
interest rates and the availability of permanent mortgage funds, which may
render the sale or refinancing of a property difficult or unattractive; changes
in real estate tax rate and other operating expenses, governmental rules
(including, without limitations, zoning laws and fiscal policies); known and
unknown environmental conditions on the property and acts of God that may result
in uninsured losses (including, without limitation, earthquakes and floods).
The purchase of property to be developed or constructed is subject to more risks
than is involved in the purchase of property with an operating history. In the
event the General Partners decide to develop the Properties, the Partnership
will be subject to the risk that there may be unanticipated delays in, or
increases in costs of, development and construction as a result of factors
beyond the control of the General Partners. These factors may include, among
others, strikes, adverse weather, material shortages, and increases in the cost
of labor and materials. Such factors can result in increased cost of a project
and corresponding depletion of the Partnership's working capital and reserves,
or loss of the Partnership's investment as a result of foreclosure by a
construction or other lender. Additional risks may be incurred where the
Partnership makes periodic progress payments or other advances to the builders
prior to completion of the construction. It should also be noted that the
development of unimproved real property is a time-consuming process which often
involves governmental approval of site and development plans, environmental
studies and reports, traffic studies, and similar items.
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The Partnership may enter into joint ventures in order to accomplish the
development of the Properties. Such transactions may create risks not otherwise
present, such as the joint venturer's investment objectives may be inconsistent
with the investment objectives of the partnership.
If the Partnership develops the Properties, either alone or in conjunction with
joint venture partners, construction arrangements will be made at that time. As
of the date of this Form 10K, no arrangements have been entered into or
negotiated with any person for the development of any of the Properties.
If the Partnership requires a loan to finance pre-development or development
activities, or to pay off or refinance an existing loan on a given property, the
availability and cost of such a loan is uncertain due to money market
fluctuations. The General Partners are unable to predict the effects of such
fluctuations on the Partnership. Money market conditions which may exist if and
when the Partnership seeks to obtain any financing with respect to the
Partnership for development or other purposes may make such financing difficult
or costly to obtain and may have an adverse effect on the Partnership's ability
to develop the Properties. Additionally, such conditions may also adversely
affect the ability of the Partnership to sell the Properties when a sale is
determined to be in the best interests of the Partnership, and may affect the
terms of any such sale.
The Partnership's investment objectives must be considered speculative and there
is no assurance that the Partnership will fulfill them.
SELLING POLICY
The Partnership seeks to sell all Properties for all cash. However, if the
General Partners deem it to be in the best interests of the Partnership and its
Limited Partners, the Partnership will sell one or more of the Properties in
exchange for receiving part of the purchase price in cash at the time of sale
and receiving the balance of the purchase price on a deferred basis. The
deferred amount will be evidenced by an interest-bearing promissory note secured
by a deed of trust on the Property sold. However, the Partnership does not
intend to carry back any promissory notes unless it obtains a first priority
lien against the Property sold.
COMPETITION
It is anticipated that the Partnership will encounter considerable competition
in the pre-development, development, operation, and eventual sale appreciation,
improvement and ultimate sale during a three to five year holding period. Even
under the most favorable marketing conditions there is no guarantee that the
Properties can be pre-developed, developed, operated, or sold, and if sold, that
such sale will be made upon terms favorable to the Partnership. Similarly, there
is no guarantee that the Partnership will be able to conduct profitable
operations on the Properties, if and when they are developed.
GOVERNMENTAL POLICIES
The Partnership's pre-development and development plans for the Properties, as
well as the value of the Properties, are dependent in large part on governmental
action. The following is a partial list of some, but not all, of the potential
problems which could arise due to governmental action or inaction.
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ZONING/PLANS/MAPS/PERMITS. Certain of the parcels are not zoned for the uses
anticipated by the Partnership. Applications have been or will be made to change
the zoning for certain of those parcels. As described under Item 2."Properties,"
some Properties have already been rezoned, but no assurances can be given that
all such rezoning changes will be approved. Zoning changes are dependent on,
among other things, whether or not such change would be consistent with the
General and Specific Plan for a given area. Further, final parcel/tract maps
have not been approved for all Properties, nor have any grading or building
permits been obtained. In the event that such Properties do not receive the
zoning desired by the General Partners, or if final maps are not approved or
permits not obtained, the value of those parcels to the Partnership and to
others may be reduced and the investment results of the Partnership may be
materially adversely affected.
GROWTH INITIATIVES. Many counties and cities in California have been subject to
so called "slow growth" initiatives which could seriously affect the ability to
timely develop properties located within a county or city passing such an
initiative. Although no such initiatives are currently pending, such an
initiative could adversely affect the use or value of those of the Properties
located within such county or city.
PROPERTY TAX REFORM AND RENT CONTROL. Statewide property tax reform has reduced
real property taxes in California. However, subsequently enacted statewide
implementing legislation may cause real property taxes in California to increase
at a more rapid rate than previously experienced and legislation enacted in
certain municipalities in response to the statewide reform requires owners of
real property to pass through property tax saving to residential and certain
commercial tenants by various means, including rent reduction. It is also
possible that legislation at the state or local level may be enacted in
California which include some form of rent control applicable to the
Partnership. In addition, certain fees and charges associated with the
acquisition and ownership of real property in California have been increased to
offset decreases in local revenue resulting from the property tax reduction.
OTHER GOVERNMENTAL INTERVENTION. There can be no assurance that there will be no
governmental intervention with respect to the Properties that would adversely
affect the use or value of the Properties. For example, building moratoriums,
changes in general or specific plans, down-zoning of the Properties or
unanticipated environmental regulation and special assessment district develop-
ment feed could impair the value of the Properties owned by the Partnership.
ENVIRONMENTAL
The Partnership may be required in certain instances to obtain environmental
impact, biological impact or other similar reports prior to development of the
Properties. Such reports may indicate conditions which make it more expensive
(or in rare cases, impossible) to develop a Property in a manner anticipated by
the Partnership, or may cause delays in the development of a Property. If a
Property is contaminated by hazardous materials, the Partnership could incur
substantial clean up costs under federal, state and local laws which could
adversely affect the investment results of the Partnership.
To date, no environmental studies have been done on the Property. The General
Partners know of no environmental conditions on the Properties that would
adversely affect the investment results of the Properties.
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EMPLOYEES
The Partnership has no employees. Management of the Partnership is provided by
the General Partners. See Item 10 "Directors and Executive Officers" for
information about the General Partners.
ITEM 1(D). FOREIGN OPERATIONS
The Partnership has no foreign operations in foreign countries:
ITEM 2. PROPERTIES
The Partnership acquired a total of five properties. All of the Properties are
in the area of Southern California known as the "Inland Empire." While no fixed
geographical boundary identifies the Inland Empire, the General Partners
consider the Inland Empire to include most of the western portion of Riverside
and San Bernardino counties and to be roughly bounded by the cities of Corona on
the west, the Coachella Valley (Palm Springs area) on the east, the City of
Victorville on the north and Temecula/Murrieta (formerly Rancho California) on
the south.
Included in this area are the communities of Perris, Sun City, Moreno Valley,
Riverside, Beaumont, San Jacinto, Palm Desert Temecula/Murrieta (formerly Rancho
California) and Elsinore in Riverside County, and Fontana, Rialto, Rancho
Cucamonga, Ontario, San Bernardino Highlands and Chino in San Bernardino County.
The Properties are unimproved and do not produce any operating income or cash
flow. It is possible that future economic conditions, governmental actions or
other factors may deter or prevent the Partnership from pre-developing or
developing the Properties, or any of them. In such even, the potential
profitability, if any, with respect to the Properties would be dependent upon
appreciation of the Properties and the Partnership's ability to refinance and
sell the same. There can be no assurance that the Properties, even if developed
by the Partnership, can be operated or ultimately sold for profit.
The Partnership owns the following properties:
<TABLE>
<CAPTION>
Date Purchase Date Sales
Property Purchased Price Sold Price
<S> <C> <C> <C> <C>
Perris 9.6 02-21-91 $1,659,000 * *
Victorville
19.55 11-13-90 $1,750,000 * *
Adelanto
18.3 12-03-90 $ 380,000 * *
Victorville
70.35 07-02-91 $1,752,500 * *
Perris
18.54 08-02-92 $ 673,000 * *
All of the Properties were still owned by the Partnership as of December 31,
1998
</TABLE>
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PERRIS 9.6. This Property, consisting of approximately 9.6 net acres, is located
at the southwest corner of the intersection of Nuevo Road and Evans in the City
of Perris, and is currently zoned C-2 (general commercial). The Property is
adjacent to the Park West Specific Plan, which contemplates 2,203 residential
dwelling units over 520 acres. Construction of the town center is completed on
Nuevo and the 215 freeway which is 1 1/2 miles from the Property.
VICTORVILLE 19.55. This Property, consisting of approximately 19.55 acres, is
located at the southeast corner of Hopland and Highway 395 in the City of
Victorville. Since contracting to buy the Property, the General Partners have
successfully achieved a rezoning from M-I-T (light manufacturing) to C-2-T
(commercial). The intersection at which the Property is located is scheduled to
become one of the major intersections in the Victor Valley. Cal Trans has
informally adopted a redesign plan for Highway 395 which will widen it to six
lanes and create traffic signal controlled intersections at Hopland and five
other cross streets in the Cities of Victorville and Adelanto. Hopland is
scheduled to become a 84 foot wide surface connector.
ADELANTO 18.3. This property, consisting of approximately 18.3 acres, is located
in the City of Adelanto and is currently zoned R-1 (residential The 73 lot
Vesting Tentative Mapwhich had expired has been resubmitted with the City of
Adelanto . . Located at the Northeast corner of Cactus and Raccoon in the City
of Adelanto, the property is part of the area to be included within the Second
Assessment District to bring sewer, water and paved streets to the Property.
VICTORVILLE 70.35. This Property, consisting of approximately 70.35 acres, is
located within the city limits of Victorville, approximately 1/2 mile east of
Highway 395 with Palmdale Drive to the north, and Luna Road to the south. When
the Property was acquired, it was zoned for three residential units per acre.
However, the general plan calls for five units per acre, and the General
Partners have initiated a plan for the Property calling for partial PUD (Planned
Unit Development) zoning and Tentative Tract Maps, which, when taken together,
will create 347 single-family home lots. The Partnership contracted with Ludwig
Engineering to do the final engineering on a deferred payment basis on these
tracts. The Partnership had a note with Ludwig Engineering for the engineering
on the Victorville 70 acre parcel. The note matured March 1, 1998. This note was
paid off in January, 1999. Infrastructure is being brought to the property by a
combination of improvements funded by the City in an Assessment District, and
neighboring developers. A new high school has recently been completed within a
half mile of the property.
PERRIS 18.54. This Property, consisting of approximately 18.54 acres, is
located southeast of and adjacent to the intersection of Oleander Avenue and
Decker Road in the Perris Area of Riverside County, California. The Property is
zoned IP ( Industrial Park). Construction of the freeway off-ramp is complete
which greatly enhances the visibility of the Property.
ITEM 3 LEGAL PROCEEDINGS
There are no matters requiring disclosure under Item 3:
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters we submitted to a vote of Registrants security holders during the
fourth quarter of 1998
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PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
As of December 31, 1998 there were approximately 887 record holders of Units of
Limited Partnership Interest. There is no other class of security outstanding or
authorized. To the General Partners knowledge, there has not been, and currently
there does not exist, any trading market for the Units. Accordingly, there was
no trading activity during the fiscal year ended December 31, 1994 - 1998.
CASH DISTRIBUTIONS
There were no cash distributions to the Partners during the fiscal years ended
December 31, 1994 - 1998.. A summary of the provisions of the Partnership
Agreement regarding distributions of cash and allocations of net income and
losses is set forth below in Item 1, "Business" under the subcaption
"Distributions, Net Income and Net Loss."
ITEM 6 SELECTED FINANCIAL DATA
The following table summarizes selected financial data of the Partnership for
the years ended December 31, 1994 - 1998 , and should be read in conjunction
with the more detailed financial statements contained in Item 8 below.
<TABLE>
(UNAUDITED)
YEAR ENDED DECEMBER 31
(Not Covered by Independent Auditor's Report)
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Interest Income $ 1,067 $ 1,139 $ 1,182 $ 1,668 $ 6,113
Total income $ 1,067 $ 1,139 $ 1,182 $ 1,668 $
6,113
Net income
(loss) $ (106,607) $ (40,493) $(3,547,464) $(2,118,961) $ 3,257
Net income
(loss) per Unit $ (12.13) $ (4.61) $ (403.68) $ (241.00) $ .37
Cash distri-
bution per Unit* $ - $ - $ - $ - $ -
========== ========= =========== =========== ==========
Total assets $2,597,545 $2,543,483 $ 2,307,755 $ 5,758,528 $7,572,605
* (Based on 8,700 Units Outstanding at December 31, 1994 - 1998.)
</TABLE>
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ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis provides information that the
Partnership's management believes is relevant to an assessment and understanding
of the Partnership's results of operations and financial condition. This
discussion should be read in conjunction with the financial statements and
footnotes, which appear elsewhere in this Report.
This discussion and analysis contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 and Sections 27A
of the Securities Act of 1933, which are subject to the "safe harbor" created by
that section. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions or variations of such
words are intended to identify forward-looking statements, but are not the
exclusive means of identifying forward-looking statements in this Report.
Additionally, statements concerning future matters such as the features,
benefits and advantages of the Partnership's property regarding matters that are
not historical are forward-looking statements. Such statements are subject to
certain risks and uncertainties, including without limitation those discussed in
"Risk Factors" sections of this Report. The Partnership's actual future results
could differ materially from those projected in the forward-looking statements.
The Partnership assumes no obligation to update the forward-looking statements.
Readers are urged to review and consider carefully the various disclosures made
by the Partnership in this Report, which attempts to advise interested parties
of the risks and factors that may affect the Partnership's business, financial
condition and results of operations.
RESULTS OF OPERATIONS
During the period from inception (July 20, 1990) through December 31, 1991, the
Partnership was engaged primarily in the sale of Units of Limited Partnership
Interest and the investment of the subscription proceeds to purchase parcels of
unimproved real property. The only cash revenues received during, 1993, 1994,
1995, 1996 1997, and 1998 were from the interest income earned on funds held.
The Partnership losses in 1995 and 1996 were due to write-downs in value of the
Partnership land due to a decline in market value of the land.,
In compliance with Statement of Financial Accounting Standards No. 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Disposed of (SFAS 121), the 1996 financial statements reported an expense for
the decline in fair value of unimproved land of $3,546,049. The 1997 financial
statements originally issued with the auditor's report dated January 28, 1998
reported $1,824,767 of income due to appreciation in fair value of land.
Pursuant to additional review by management and the predecessor accounting firm,
it was determined that SFAS 121 does not provide for recording appreciation in
fair value of a real estate asset. Therefore, the 1997 financial statements were
restated by the predecessor independent accounting firm on August 3, 1998 to
reverse the appreciation in fair value of land. In addition, certain carrying
costs of land that were previously capitalized have been restated as current
expenses in the amount of $21,949 for the year ended December 31, 1998.
The Partnerships management believes that inflation has not had a material
effect on the Partnership's results of operations or financial condition.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The partnership raised a total of $7,722,751, net of syndication costs, from the
sale of Limited Partnership Units. During the period from inception through
December 31, 1995, the Partnership acquired a total of five Properties for all
cash at a total expenditure of $7,457,705, including direct carrying costs, such
as interest and property taxes.
The Partnership does not intend to acquire any additional Properties. The five
Properties are being held for resale. Upon sale, if any, the Partnership intends
to distribute the sales proceeds, less any reserves needed for operations, to
the Partners.
The Partnership owns land in the Riverside and San Bernardino counties That
region of Southern California experienced a significant economic recession that
has substantially eroded the value of real estate in that area. The region is
beginning to show some signs of recovery; however, recovery has been very slow
In March and November 1997, the General Partners procured loans of $125,000 and
$233,825 respectively to provide cash for Partnership operations. The loans are
secured by Partnership land. (See Note 7 of the Partnership Financial Statement)
The Partnership had a note with Ludwig Engineering for the engineering on the
Victorville 70 acre parcel. The note matured March 1, 1998. This note was paid
off in February 1999. (See Note 7 of the Partnership Financial Statement)
There are no current plans to further develop any of the parcels, and it is
expected that no such plans would be undertaken unless adequate funding could be
obtained, either from the sale or refinancing of parcels or from a joint venture
partner.
In March, 1998, the General Partners of the Partnership entered into an
agreement (the Financing Agreement) with PacWest Inland Empire, LLC (PacWest), a
Delaware limited liability company, whereby PacWest paid a total of $300,000 to
the General Partners of the Partnership and ten other related partnerships (the
TMP Land Partnerships). PacWest agreed to pay up to an additional $300,000 for
any deficit capital accounts for these 11 partnerships in exchange for the
rights to distributions from the General Partners; referred to as a
"distribution fee" as defined by the Financing Agreement.
In addition, PacWest has agreed to loan and/or secure a loan for the TMP Land
Partnerships in the amount of $2,500,000. Loan proceeds will be allocated among
the 11 TMP Land Partnerships, based on partnership needs, from recommendations
made by PacWest, and under the approval and/or direction of the General
Partners. A portion of these funds will be loaned to the Partnership at 12%
simple interest over a 24 month period beginning April 1, 1998. The borrowings
are secured by the Partnership's properties, and the funds will be loaned, as
needed, in the opinion of the General Partners. These funds are not to exceed
50% of the 1997 appraised value of the properties, and will primarily be used to
13
<PAGE>
pay for on-going property maintenance, reduction of existing debt,property taxes
in arrears, appropriate entitlement costs and Partnership operations.
PacWest, can, at their option, make additional advances with the agreement of
the General Partners. However, the aggregate amount of cash loaned to the TMP
Land Partnerships is limited to a maximum of $2,500,000. As of December 31,1998
the PacWest has loaned the Partnership $113,498 for ongoing operations.
In April 1998, PacWest entered into a management, administrative and consulting
agreement (the Management Agreement) with the General Partners of the
Partnership to provide the Partnership with overall management, administrative
and consulting services. PacWest currently contracts with third party service
providers to perform certain of the financial, accounting, and investor
relations services for the Partnership.
Pursuant to the Management Agreement, PacWest has acquired the General Partners'
unsubordinated 1% interest in the Partnership and assumed responsibility for all
partnership administration while not replacing any of the General Partners.
PacWest is paid a fee of $15,998 annually for its administrative services.
RISK FACTORS
Year 2000 Compliance. Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field.
Beginning in the year 2000, these date code fields will need to accept four
digit entries to distinguish 21st century dates. As a result, computer systems
and/or software used by organizations may need to be upgraded to comply with the
"Y2K" requirements. There is significant uncertainty in the software and
information services industries concerning the potential effects associated with
such compliance. While the Partnership believes that its systems are compatible
with Y2K applications, there can be no assurance that all Partnership systems
will function properly in all operating environments and on all platforms. The
failure to comply with Y2K requirements by systems not designed by the
Partnership may also have a material adverse effect on the Partnership's
business, financial condition and results of operations. The Partnership has
developed and implemented a plan to identify and address potential difficulties
associated with Y2K issues and does not expect to expend any significant funds
as a result of these issues.
The Partnership utilizes a number of computer software programs and operating
systems across its entire organization including applications used in financial
business systems and various administrative functions. The Partnership has
established an action plan for addressing Year 2000 issues. As a general matter,
the Partnership is vulnerable to failures by third parties to address their own
Year 2000 issues. The Partnership relies heavily upon third parties for
financial services. There can be no assurance that the Partnership's suppliers
and other third parties will adequately address their Year 2000 issues, and any
such issues could have a material adverse affect upon the Partnership's
financial condition and results of operation.
14
<PAGE>
Partnership has not spent a material amount of financial resources to remediate
Year 2000 problems and does not anticipate that it will spend a material amount
of financial resources to remediate Year 2000 problems in the future. The costs
of such remediation will be paid out as part of the Partnership's general and
administrative expenses.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as a part of this Form 10 K-SB:
For the fiscal years ended December 31, 1998 and 1997
Page No.
Independent Auditors Report 1, 2
Balance Sheet as of December 31, 1998 3
Statements of OperationS for the years ended December
31, 1998 and 1997 4
Statements of Partners Capital for the years ended
December 31, 1998 and 1997 5
Statements of Cash Flow for the years ended
December 31,1998 and 1997 6
Notes to Financial Statements 7 - 11
Financial Statement Schedules 12, 13
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in the
Financial Statements and Notes thereto.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no disagreements with the Independent Accounting Firm. On March 29,
1999 the Registrant filed a Form 8-K in which it terminated the accounting firm
of Balser, Horowitz, Frank & Wakeling and appointed the independent accounting
firm of Swenson Advisors, LLP.
15
<PAGE>
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS
The Partnership has no employees and no directors or executives officers.
Management of the Partnership is provided by the General Partners. However, on
April 1, 1998, PacWest entered into a management, administrative and consulting
agreement (the Management Agreement) with the general partners of the
Partnership to provide the Partnership with overall management, administrative
and consulting services. PacWest currently contracts with third party service
providers to perform certain of the financial, accounting, and investor
relations services for the Partnership.TMP Properties, a California general
partnership, and TMP Investments, Inc., a California corporation, are the
General Partners of the Partnership. TMP Properties was formed on July 14, 1978.
TMP Properties' principal business has been the acquisition of undeveloped land
and the coordination of activities necessary to add value to such land,
primarily through the predevelopment process. It has syndicated numerous private
real estate limited partnerships, and eleven public real estate limited
partnerships. All of the properties purchased by such partnerships were located
in the State of California except for one (an office building) which was located
in Oklahoma City, Oklahoma. Each of such limited partnerships involved a
specified real property program in which TMP Properties was the general partner.
The general partners of TMP Properties are William O. Paso, Anthony W. Thompson
and Scott E. McDaniel.
The individual partners of TMP Properties are listed below, together with
information regarding their employment experience and background.
TMP Investment Inc., a California corporation, was formed on December 12, 1984.
TMP Investments Inc. has served in the capacity of a co-general partner in all
of the TMP sponsored programs since December 1984. In 1993, TMP Investments Inc.
began serving as sole general partner in all TMP sponsored partnerships. TMP
Investments Inc. has been and will continue to be engaged in asset management,
real estate accounting, budgetary services, and partnership management on behalf
of existing limited partnerships and limited partnerships which it sponsors in
the future. The shareholders of TMP Investments, Inc. were William O. Passo,
Anthony W. Thompson, and Scott E. McDaniel until September 1993, when Mr.
McDaniel sold his share of TMP Investments Inc. to Mr. Passo and Mr. Thompson.
WILLIAM O. PASSO, 57, is a Director and the President of TMP Investments Inc. He
practiced law for 18 years, has been a licensed real estate broker since 1974
and holds registered representative and general principals securities licenses
through the National Association of Securities Dealers, Inc. Mr. Passo received
his Juris Doctorate Degree from UCLA School of Law in 1967. He has been a senior
partner first of Passo, Yates, and Nissen until 1975, then of Passo & Davis
until March 1983 when he resigned from the partnership to take a leading role in
the management of the affairs of TMP Properties. Mr. Passo has been involved in
public and private real estate syndication since 1970, and has acted as
principal, investor, general partner, and counsel in real estate transactions
involving apartments, office buildings, agricultural groves, and unimproved
land. Mr. Passo is a director and officer of William O. Passo, Inc. (dba TMP
Management), a property management company, an officer of TMP Capital Corp., an
NASD registered broker-dealer, and an officer of TMP Realty, a registered real
estate broker.
16
<PAGE>
SCOTT E. MCDANIEL, 52, is a General Partner of TMP Properties. He is a graduate
of the U.S. Naval Academy at Annapolis, majoring in engineering. Mr. McDaniel is
a California licensed general contractor and has been a licensed California real
estate broker since 1976. He was the founder and President of Scott E. McDaniel,
Inc. (dba Regal Realty). Mr. McDaniel has developed office complexes and
industrial space in Southern California and has personally brokered over $125
million of real estate since 1982. Through an affiliated company, DeVille
Construction Co. Inc., Mr. McDaniel has directed general contracting operations
in Southern California since 1982.
ANTHONY W. "TONY" THOMPSON, 52, is Director and Vice-President of TMP
Investments Inc. A graduate of Sterling College in 1969, with a Bachelors Degree
in Science and Economics, Mr. Thompson holds the professional designations of
Charter Life Underwriter and chartered Financial Consultant form the American
College. Mr. Thompson is a registered principal with the NASD and is a principal
in TMP Capital Corp., a NASD registered Broker Dealer. Mr. Thompson has been
involved in the securities and the real estate investment fields since 1970, and
a General Partner of TMP since its formation in 1978. Mr. Thompson's primary
responsibility is marketing TMP offerings through the broker dealer community.
The General Partners have raised over $100,000,000 since 1978 for properties
which they, or partnerships with which they are affiliated, have purchased.
ITEM 11 EXECUTIVE COMPENSATION
During the period since the formation of the Partnership (March 20, 1990)
through the fiscal year ended December 31, 1998, the Partnership paid fees to
the General Partners for various services in the amount of $102,545 of which
none was paid in the year ended December 31, 1998. The General Partners did not
receive any Partnership distribution during that period. (See Item 13. "Certain
Relationships and Related Transactions".) The Partnership has no officers or
employees and, therefore, paid no other compensation other than that paid to the
General Partners as indicated above.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1998, the Partnership had 8,700 units of Limited Partnership
interest (the "Units") issued and outstanding. To the knowledge of the General
Partners, no person beneficially owns more the 5% of the Units. The following
table set forth the number of Units beneficially owned as of December 31, 1998
by each officer, director and general partner of the General Partners and by all
such persons as a group.
17
<PAGE>
Number of Percent of
Name of Beneficial Owner Units Class
William O. Passo 21 0.272%
Anthony W. Thompson 48 0.621%
All officers, directors and 69 0.893%
general partners as a group
(2 persons, including the above)
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH AFFILIATES
The following information summarizes the forms and amounts of compensation (some
of which involve cost reimbursements) paid either by the Partnership, or others,
to the General Partners and their affiliates since the formation of the
Partnership (July 20, 1990) through the fiscal year ended December 31, 1998. The
information under "Operating and Liquidation Stage" and "Summary of
Compensation" below also describes the amounts of compensation to be paid to the
General Partners and their affiliates in the future. None of these amounts were
determined by arm's-length negotiations. Reference is also made to the Notes to
the Financial Statements included elsewhere in this Form 10K for additional
information regarding transactions with affiliates.
<TABLE>
OFFERING AND ORGANIZATION STAGE OF PARTNERSHIP
<CAPTION>
Amount Paid from
Form of Compensation Formation through
and Recipient Description of Payment December 31, 1998
- ------------- ---------------------- -----------------
<S> <C> <C>
Selling Commission and Up to a maximum of 10% of gross $ 780,008
Due Diligence proceeds, a minimum of which was
Reimbursement (TMP reallocated to participating Soliciting
Capital Corp.) Dealers (which included TMP Capital
Corp.) from Units sold by them. Up to
an additional 0.5% paid to Soliciting
Dealers (which included TMP Capital
Corp.) for due diligence activities.
Reimbursement for Organizational Expenses paid to the $ 13,426
Organizational Expenses General Partners to reimburse them
(General Partners) (without markup or profit) for
organizational costs actually incurred
such as advertising, mailing,
printing costs, clerical expenses,
legal and accounting fees.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Reimbursement for The General Partners were reimbursed $351,234
Property Expenses (without markup or profit) for all out
(General Partners) of pocket expenses directly related to
the Properties, including the purchase
price of Properties acquired prior to
Partnership formation, out of pocket
carrying costs of such Properties (such
as interest and property taxes) including
actual interest incurred on all funds
advanced for the benefit of the
Partnership, deposits, escrow extension
payments, appraisal fees, expenses of
feasibility and other studies performed
by third parties unaffiliated with the
General Partners and similar expenses,
but not including the General
Partners' overhead, salaries, travel
or like expenses.
Property Acquisition For services rendered in connection
Fees with the acquisition of the Properties
(General Partners acquired by the Partnership, the
or an affiliate) General Partners, or an affiliate,
received acquisition compensation
(either denominated as such, or
as a real estate brokerage com-
mission, or otherwise) in the
following amounts:
(i) Acquisition fees: $500,000
(ii) Real estate brokerage $158,900
commissions
OFFERING AND ORGANIZATION STAGE OF PARTNERSHIP
Amount Paid from
Form of Compensation Formation through
and Recipient Description of Payment December 31, 1998
- ---------------------- -------------------------- -----------------
Partnership Management A Partnership Management Fee with $102,545
Fee respect to each Property until a
(General Partners) Property is sold or improvement
of the Property commences in
an annual amount of 1/4 of 1%
(.25%) of the cost of the
property, but not to exceed 2% of
such cost in the aggregate.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Leasing and Property For leasing an improved Property, $-0-
Management Fees or a portion thereof, a commission
(General Partners or an 7% for the first year's rent (net
affiliate) lease) equal to or 6% of the first year's
rent (gross lease) decreasing to
2.5% (net lease) or 2% (gross
lease) of the rent for years
eleven through thirty. Upon
development of the Properties,
or any of them, an amount up to
5% of the gross revenues
of the Properties for super-
vision for the operation and
maintenance of the Properties.
Such leasing and property manage-
ment fees shall not exceed the
competitive rates that would
be charged by unaffiliated persons.
Interest in Partnership 1% interest in all Partnership $-0-
Allocation of Each allocations of Net Income, Net Loss and
Material Item Distributions of Distributable Cash
(General Partners) from Operations and of Cash from Sale
or refinancing of the Properties.
Subordinated A 15% interest in all Partnership $-0-
Participation allocations of Net Income and
(General Partners) Distributions of Distributable Cash from
Operations and of Cash from the Sale
or Refinancing of the Properties
subordinated to a return of all Limited
Partners' Capital Contributions plus a
cumulative, non-compounded return
of 6% per annum on their Adjusted
Capital Contributions.
Subordinated Real Real estate commissions with respect to $-0-
Estate Commission the sale of Properties which are equal
(General Partners to the lesser of: (I) 3% of the gross
or an Affiliate) sales price of a Properties; equal to
one-half the normal and competitive
rate charged by unaffiliated parties, but
payment shall be subordinated to a
return of all Limited Partners'Capital
contributions, plus a cumulative,
noncompounded return of 6% per
annum on their Adjusted Capital
Contributions.
</TABLE>
20
<PAGE>
SUMMARY OF COMPENSATION. In summary, the Partnership paid securities brokerage
commissions for services performed by TMP Capital Corp. in the sale of the Units
in the amount of $780,008 (including due diligence fees) and reimbursed the
General Partners for expenses incurred in organizing the Partnership and
documenting the offering in the amount of $13,426. The General Partners also
received Property Acquisition Fees and real estate brokerage commissions in the
amounts set forth above, and were reimbursed for out of pocket expenditures made
in connection with the acquisition and carrying costs for the Properties or
studies related thereto. During the operating stage, the partnership will pay
the General Partners an annual Partnership Management Fee for managing the
Partnership equal to 1/4 of 1% of the cost of the Properties, payable annually
in advance with respect to each Property until such time as the Properties are
sold or improvement of the land commences; provided such fee, in the aggregate,
shall not exceed 2% of the cost of the Properties. At such time, if at all, that
the Properties, or any of them, are developed, the General Partners will receive
leasing commissions as described above, and a property management fee in an
amount up to 5% of the gross property revenues, but not to exceed the
competitive rate charged by nonaffiliated persons providing similar services.
The General Partners have a 1% interest in all allocations of Partnership Net
Income until the limited Partners have received allocations of Net Income equal
to a cumulative, noncompounded return of 6% on their Adjusted Capital
Contributions (the "Preferred Return"); and thereafter, the General Partners
will have a 16.5% interest in all Partnership allocations of Net Income,
Distributions of Distributable Cash from Operations, and Cash from Sale or
Refinancing of Partnership Property and the Limited partners will have an 83.5%
interest therein. Net Losses and nonrecourse deductions shall be allocated 1% to
the General Partners and 99% to the Limited Partners until the Limited Partners
have received distributions equal to their capital contributions plus their
preferred return; and thereafter 85% to the Limited Partners and 15% to the
General Partners; provided however, no allocation of Net Losses shall be made to
a limited partner to the extent that the allocation would create or increase a
negative balance in that limited partner's capital account. In the event, a
Limited Partner may not be allocated Net Losses, net losses shall be allocated
one hundred percent (100%) to the General Partners. If the General Partners or
an Affiliate provide a substantial amount of services with respect to the sale
of a Partnership Property, the General Partners or an Affiliate may receive a
real estate commission in an amount up to one-half of the amount of competitive
real estate commissions, not to exceed 3% of the sales price of such Property.
Both the 16.5% General Partners' participation and the Partners' real estate
commission are subordinated to a return of all Limited Partners' Capital Contri-
bution plus a cumulative, non-compounded return of 6% per annum on their
Adjusted Capital contributions.
Thus, only after the Limited Partners have recovered their Capital Contributions
plus the cumulative 6% return discussed above, will the General Partners'
allocation of Distributions of Distributable Cash from Operations and Cash from
Sale or Refinancing of Partnership Property exceed a nominal 1% ownership
interest therein. Such allocation provides built-in incentive for the General
Partners to seek the optimum performance from the Partnership's Properties.
CONFLICTS OF INTEREST
The Partnership is subject to various conflicts of interest from its
relationship with the General Partners. These conflicts include, but are not
limited to:
CONFLICTS IN GENERAL. The interests for the Limited Partners may be inconsistent
with those of the General Partners or their Affiliates when the General Partners
must make policy decisions on behalf of the Partnership. The General Partners,
for instance, might not desire to sell a Property when a sale would be
advantageous to the Limited Partners because of the General Partner's interest
in Distributions of Distributable Cash from Operations and Net Proceeds from the
21
<PAGE>
Sale or Refinancing of the Property. Subject in certain circumstances to the
approval of the holders of a majority or other specified voting percentage of
the Units, the General Partners will have the discretion as to when to sell a
Property or portion thereof. The timing of the sale of a Property or any portion
thereof and the terms on which such sale will be made may result in a conflict
of interest. Furthermore, the sale of a Property may result in the recognition
of substantial taxable gain to the General or Limited Partners in different
ratios depending upon three timing of such sale. Accordingly, the decisions as
to when to sell a Property may be advantageous to the General Partners and
disadvantageous to the Limited Partners, or vice versa. The General Partners in
any event will be compelled to make any decisions with respect to the sale or
retention of a Property based upon the best interests of the a Partnership and
its Limited Partners because of the fiduciary duty which they owe to the Limited
Partners.
AVAILABILITY OF MANAGEMENT SERVICE. Under the Partnership Agreement, the General
Partners are obligated to devote as much time as they, in their sole discretion,
deem to be reasonably required for the proper management of the Partnership and
its assets. The General Partners believe that they have the capacity to
discharge their responsibilities to the Partnership notwithstanding
participation in other investment programs and projects. In April 1998, PacWest
Inland Empire, LLC (PacWest)entered into a management, administrative and
consulting agreement with the general partners of the Partnership to provide the
Partnership with overall management, administrative and consulting services.
PacWest currently contracts with third party service providers to perform
certain of the financial, accounting, and investor relations services for the
Partnership.
INTERESTS IN OTHER ACTIVITIES. The General Partners, or any of their affiliates,
may engage for their own account, or for the account of others, in other
business ventures, whether real estate or otherwise, and neither the Partnership
nor any Limited Partner shall be entitled to any interest therein solely by
reason of any relationship with or to each other arising from the Partnership.
RECEIPT OF COMPENSATION BY THE GENERAL PARTNERS. The payments to the General
Partners set forth above have not been determined by arm's-length negotiations.
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8K
(a) For a listing of financial statements, reference is made to Item 8 included
in this Form 10K
(b) The Registrant filed no reports on Form 8K during the fourth quarter of the
fiscal year ended December 31, 1998 However, a Form 8K was filed on March
29, 1999
(c) Exhibits - Those Exhibits required by Item 601 of Regulation S-K which are
applicable to the Registrant are as follows:
(3), (4) and (10.1) Agreement of Limited Partnership and other material
agreements are incorporated by reference to Exhibits
(3),(4) and (10.1) to the Form 10 Registration State-
ment, SEC File No. 0-20120 filed on April 24, 1992.
27 Financial Data Schedule
22
<PAGE>
TMP INLAND EMPIRE VII, LTD
(A California Limited Partnership)
Financial Statements
December 31, 1998 and 1997
Table of Contents
-----------------
Reports of Independent Auditors 1-2
Balance Sheet 3
Statements of Operations 4
Statements of Partners' Capital 5
Statements of Cash Flows 6
Notes to Financial Statements 7-11
Supplementary Information 12-13
<PAGE>
Report of Independent Auditors
To the Partners
TMP Inland Empire VII, Ltd.
(A California Limited Partnership)
We have audited the accompanying balance sheet of TMP Inland Empire VII, Ltd. (A
California Limited Partnership) as of December 31, 1998, and the related
statements of operations, partner' capital, and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TMP Inland Empire VII, Ltd. (A
California Limited Partnership) as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information contained in Schedule
I is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is stated fairly in all material respects in relation to the
basic financial statements taken as a whole.
The financial statements as of December 31, 1997, were examined by other
auditors. As discussed in Note 8, they expressed an unqualified opinion on
January 26, 1998, and on August 3, 1998 reissued their unqualified opinion for
the year ended December 31, 1997.
Swenson Advisors, LLP
SWENSON ADVISORS, LLP
An Accountancy Firm
Temecula, California
March 26, 1999
-1-
<PAGE>
Independent Auditor's Report
To the Partners
TMP Inland Empire VII, Ltd.
(A California Limited Partnership)
We have audited the accompanying balance sheet of TMP Inland Empire VII, Ltd. (A
California Limited Partnership) as of December 31, 1997 and the related
statements of income, partners' capital, and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TMP Inland Empire VII, Ltd. (A
California Limited Partnership) as of December 31, 1997 and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information contained in Schedule
I is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is stated fairly in all material respects in relation to the
basic financial statements taken as a whole.
Balser, Horowitz, Frank and Wakeling
BALSER, HOROWITZ, FRANK & WAKELING
An Accountancy Corporation
Santa Ana, California
January 26, 1998, except for Note 7, as to which the date is August 3, 1998
-2-
<PAGE>
<TABLE>
TMP INLAND EMPIRE VII. LTD.
(A California Limited Partnership)
Balance Sheet
December 31, 1998
<CAPTION>
Assets
------
<S> <C>
Cash $ 547
Investment in Unimproved Land, net (Note 8) 2,590,709
Prepaid Expenses 5,039
----------------
Total Assets $ 2,596,295
================
Liabilities and Partners' Capital
---------------------------------
Due to Affiliates (Note 5) $ 113,498
Accrued Interest Payable 57,021
Franchise Tax Payable 800
Other Current Liabilities 782
Notes payable (Note 7) 666,529
- -------
Total Liabilities 838,630
-------
Partners' Capital (Deficit) (Notes 3 and 4)
General Partners (59,351)
Limited Partners; 8,700 Equity Units
Authorized and Outstanding 1,817,016
---------
Total Partners' Capital 1,757,665
---------
Total Liabilities and Partners' Capital $ 2,596,295
================
</TABLE>
See Accompanying Notes
-3-
<PAGE>
<TABLE>
TMP INLAND EMPIRE VII. LTD.
(A California Limited Partnership)
Statements of Operations
For the Years Ended December 31, 1998 and 1997
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Income
- ------
Interest Income $ 1,067 $ 1,139
-------------- ---------------
Total Income 1,067 1,139
-------------- ---------------
Expenses
Accounting and Financial Reporting 38,604 6,173
Partnership Management Fees 27,417 15,419
Outside Professional Services 15,551 -
General and Administrative 23,507 -
Expense Reimbursements 0 19,240
Interest Expense 1,795 -
-------------- ---------------
Total Expense 106,874 40,832
-------------- ---------------
Loss Before Income Taxes (105,807) (39,693)
-------------- ---------------
State Franchise Tax 800 800
-------------- ---------------
Net Loss $ (106,607) $ (40,493)
============== ==============
Allocation of Net Loss
General Partners, in the Aggregate $ (1,066) $ (405)
Limited Partners, in the Aggregate $ (105,541) $ (40,088)
Limited Partners, per Equity Unit $ (12.13) $ (4.61)
</TABLE>
See Accompanying Notes
-4-
<PAGE>
<TABLE>
TMP INLAND EMPIRE VII. LTD.
(A California Limited Partnership)
Statements of Partners' Capital
For the Years Ended December 31, 1998 and 1997
<CAPTION>
General Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Partners' Capital (Deficit)
December 31, 1996 $(57,880) $1,962,645 $ 1,904,765
Net Loss for 1997 (405) (40,088) (40,493)
Partners' Capital (Deficit)
December 31, 1997 (58,285) 1,922,557 1,864,272
Net Loss for 1998 (1,066) (105,541) (106,607)
Partners' Capital (Deficit)
December 31, 1998 $(59,351) $1,817,016 $ 1,757,665
</TABLE>
See Accompanying Notes
-5-
<PAGE>
<TABLE>
TMP INLAND EMPIRE VII. LTD.
(A California Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1998 and 1997
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash Flow from Operating Activities
Net Loss $ (106,607) $ (40,493)
Adjustments to Reconcile Net Loss
to Net Cash Used In Operating
Activities:
Increase or (Decrease)
in Prepaid Expenses 27,181 (32,220)
Increase in Carrying Costs (176,308) (114,401)
Increase or (Decrease) in
Accrued Interest Payable 29,087 (56,431)
Increase in Other Current
Liabilities 782 -
Increase in Due to Affiliates 102,689 10,106
Decrease in Property Tax Payable (26,214) (61,280)
------- -------
Net Cash Used In Operating Activities (149,390) (294,719)
-------- --------
Cash Flow from Financing Activities
Payments on Notes Payable (10,000) -
Issuance of Notes Payable 63,075 383,826
------ -------
Net Cash Provided by Financing Activities 53,075 383,826
------ -------
Net Increase or (Decrease) in Cash (96,315) 89,107
Cash, Beginning 96,862 7,755
------ -----
Cash, Ending $ 547 $ 96,862
============== ===============
Supplemental Disclosures of
Cash Flow Information
- --------------------------
Cash paid for income taxes $ 800 $ 800
Cash paid for interest $ 50,099 $ 18,131
</TABLE>
See Accompanying Notes
-6-
<PAGE>
TMP INLAND EMPIRE VII. LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1998 and 1997
Note 1 - General and Summary of Significant Accounting Policies
General - TMP Inland Empire VII, Ltd. (the Partnership) was organized
in 1990 in accordance with the provisions of the California Uniform
Limited Partnership Act for the purpose of acquiring, developing and
operating real property in the Inland Empire area of Southern
California.
Accounting Method - The Partnership's policy is to prepare its
financial statements on the accrual basis of accounting.
Investment in Unimproved Land - Investment in unimproved land is stated
at the lower of cost or fair value. All costs associated with the
acquisition of a property are capitalized. Additionally, the
Partnership capitalizes all direct carrying costs (such as interest
expense and property taxes). These costs are added to the cost of the
properties and are deducted from the sales prices to determine gains,
if any, when the properties are sold.
Syndication Costs - Syndication costs (such as commissions, printing,
and legal fees) totaling $1,007,223 represent costs incurred to raise
capital and, accordingly, are recorded as a reduction in partners'
capital (see Note 3).
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Concentration - All unimproved land parcels held for investment are
located in the Inland Empire area of Southern California. The eventual
sales price of all parcels is highly dependent on the real estate
market condition. The Partnership attempts to mitigate any potential
risk by continually monitoring the market conditions and holding the
land parcels through any periods of declining market conditions.
Income Taxes - The Partnership is treated as a partnership for income
tax purposes and accordingly any income or loss is passed through and
taxable to the individual partners. Accordingly, there is no provision
for federal income taxes in the accompanying financial statements.
However, the minimum California Franchise tax payable annually by the
Partnership is $800.
-7-
<PAGE>
TMP INLAND EMPIRE VII. LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1998 and 1997
New Accounting Standards - In June 1998 the Financial Accounting
Standards Board issued Statement of financial Accounting Standards No.
133, "Accounting for Derivative instruments and Hedging Activities."
The new statement requires all derivatives to be recorded on the
balance sheet at fair value and establishes new accounting rules for
hedging instruments. This statement will have no effect on the
financial statements of the Partnership.
Note 2 - Organization of the Partnership
On July 20, 1990, the Partnership was formed with TMP Properties (A
California General Partnership) and TMP Investments, Inc. (A California
Corporation) as the General Partners. The partners of TMP Properties
are William O. Passo, Anthony W. Thompson and Scott E. McDaniel.
William O. Passo and Anthony W. Thompson were the shareholders of TMP
Investments, Inc. until October 1, 1995, when they sold their shares to
TMP Group, Inc., and then became the shareholders of TMP Group, Inc.
The Partnership originally acquired four separate parcels of unimproved
real property in Riverside and San Bernardino Counties, California.
During 1992, one additional parcel in Riverside County was purchased by
the partnership. The properties were to be held for investment,
appreciation, and ultimate sale and/or improvement of all or a portion
thereof, either alone or in conjunction with a joint venture partner.
The partnership agreement provides for two types of investments:
Individual Retirement Accounts (IRA) and others. The IRA minimum
purchase requirement was $2,000 and all others were a minimum purchase
requirement of $5,000. The maximum liability of the limited partners is
the amount of their capital contribution.
Note 3 - Partners' Contributions
The Partnership offered for sale 8,700 units at $1,000 each to
qualified investors. As of December 31, 1992, all 8,700 units had been
sold for total limited partner contributions of $8,700,000. There have
been no contributions made by the General Partners. As described in
Note 1, syndication costs have been recorded as a reduction in
partners' capital.
Note 4 - Allocation of Profits, Losses and Cash Distributions
Profits, losses and cash distributions are allocated 99% to the limited
partners and 1% to the general partners until the limited partners have
received an amount equal to their capital contributions plus a
-8-
<PAGE>
TMP INLAND EMPIRE VII. LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1998 and 1997
cumulative, non-compounded return of 6% per annum on their adjusted
capital contributions. At that point, the limited partners are
allocated 83.5% and the general partners 16.5% of profits, losses and
cash distributions. There were no distributions in 1998 or 1997.
Note 5 - Agreements With PacWest Inland Empire, LLC
In March 1998, the General Partners of the Partnership entered into an
agreement (the Financing Agreement) with PacWest Inland Empire, LLC
(PacWest), a Delaware liability company, whereby PacWest paid a
total of $300,000 to the General Partners of the Partnership and ten
other related partnerships (the TMP Land Partnerships. In addition,
PacWest agreed to pay up to an additional $300,000 for any deficit
capital accounts for these 11 partnerships in exchange for the rights
to distributions from the General Partners; referred to as a
"distribution fee" as defined by the Financing Agreement. Pursuant to
the Management Agreement, PacWest has acquired the General Partners'
unsubordinated 1% interest in the Partnership and assumed responsibil-
ity for all partnership administration while not replacing any of the
General Partners.
In addition, PacWest has agreed to loan and/or secure a loan for the
Partnership the TMP Land Partnerships in the amount of $2,500,000. Loan
proceeds will be allocated among the 11 TMP Land Partnerships, based on
partnership needs, from recommendations made by PacWest, and under the
approval and/or direction of the general partners. A portion of these
funds will be loaned to the Partnership at 12% simple interest over a
24 month period beginning April 1, 1998. The borrowings are secured by
the Partnership's properties, and funds will be loaned, as needed, in
the opinion of the General Partners. These funds are not to exceed 50%
of the 1997 appraised value of the properties, and will primarily be
used to pay for on-going property maintenance, pay down existing debt,
back property taxes and appropriate entitlement costs.
PacWest, can, at their option, make additional advances with the
agreement of the General Partners; however, the aggregate amount of
cash loaned to the TMP Land Partnerships is limited to a maximum of
$2,500,000.
In April 1998, PacWest entered into a management, administrative and
consulting agreement (the Management Agreement) with the General
Partners of the Partnership to provide the Partnership with overall
management, administrative and consulting services. PacWest currently
contracts with third party service providers to perform certain of the
financial, accounting, and investor relations services for the
Partnership. PacWest will charge a fee for its administrative services
equal to an amount not to exceed the average reimbursements to the
General Partners for such services over the past five years. As of
December 31, 1998, the Partnership has an amount due of $218,442 to
PacWest related to the aforementioned agreements.
Pursuant to the Management Agreement PacWest has acquired the General
Partners' unsubordinated 1% interest in the Partnership and assumed
responsibility for all partnership administration while not replacing
any of the General Partners. PacWest will charge a fee for its
administrative services equal to an amount not to exceed the average
reimbursements to the General Partners for such services over the past
-9-
<PAGE>
TMP INLAND EMPIRE VII. LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1998 and 1997
five years. As of December 31, 1998, the Partnership has an amount due
of $113,498 to PacWest related to the aforementioned agreements.
Note 6 - Related Party Transactions
Syndication costs (see Note 1) include $870,000 of selling commissions
paid in prior years to TMP Capital Corp. for the sale of partnership
units of which a portion was then paid to unrelated registered
representatives. William O. Passo and Anthony W. Thompson were the
shareholders of TMP Capital Corp.
until October 1, 1996, when they sold their shares to TMP Group, Inc.
Investment in unimproved land includes acquisition fees of $500,000
paid in prior years to TMP Properties, TMP Investments, Inc., and the
General Partners, for services rendered in connection with the
acquisition of the properties.
The Partnership paid $15,419 in partnership management fees to the
General Partners for the year ended December 31, 1997. The Partnership
was also charged $10,468 during the year ended December 31, 1997 by the
General Partner and an affiliated company of the General Partners for
office, secretarial and advertising expenses. (See also Note 7.)
Notes 7 - Notes Payable
In 1997, the Partnership entered into an amended loan agreement with an
outside party who provided engineering service for various land
parcels. The loan amount of $317,704 accrued interest at 10% per annum,
and the interest was payable on or before February 28, 1998. The
principal amount was payable in full upon sale of the land parcels or
upon recordation of the final tract maps for the same parcels and is
secured by those parcels. The loans were guaranteed by the three
General Partners of TMP Properties and by TMP Properties. As of
December 31, 1998, the outstanding principal balance was $307,704.
These notes were repaid in full in February 1999.
In 1997, the Partnership entered into a loan agreement with an outside
party by offering parcels owned by the partnership as collateral. The
total loan amount of $125,000 accrues interest at 14% per annum, and
the interest is payable monthly beginning April 1, 1997 and was
originally due in February 1999. In February 1999, the note payable was
amended to extend the due date to February 2001, to decrease the
interest rate to 12.25% and reduce the monthly payment to $1,276 per
month beginning on March 1, 1999.
In 1997, the Partnership entered into a loan agreement with an outside
party by offering parcels owned by the partnership as collateral. The
total loan amount of $233,825 accrues interest at 13.5% per annum, and
-10-
<PAGE>
TMP INLAND EMPIRE VII. LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1998 and 1997
the interest is payable monthly. This note matures in November 1999.
Notes 8 - Restatement and Reissuance of 1997 Financial Statements
In compliance with Statement of Financial Accounting Standards No. 121
Accounting for the Impairment of Long-Lived Assets to Be Disposed Of
(SFAS 121), the financial statements reported an expense for the
decline in fair value of unimproved land of $3,546,049 and $2,117,773
for 1996 and 1995, respectively. The 1997 financial statements
originally issued with the auditor's report dated January 26, 1998
reported $1,824,767 of income due to appreciation in fair value of
land. Pursuant to additional review by management and the predecessor
accounting firm, it was determined that SFAS 121 does not provide for
recording appreciation in fair value of a real estate asset.
Therefore, the 1997 financial statements were restated to reverse the
appreciation in fair value of land on August 3, 1998 by the predecessor
accounting firm.
In addition, certain carrying costs of land that were previously
capitalized have also been re-stated as expenses in the amount of
$40,832 for the year ended December 31, 1997.
Note 9 - Year 2000 Issue (unaudited)
Like other organizations and individuals around the world, the
Partnership could be adversely affected if the computer systems it uses
and those used by the Company's major customers and vendors do not
properly process and calculate date-related information and data from
and after January 1, 2000. This is commonly known as the "Year 2000
Issue." Management is assessing its computer systems and the systems
compliance issues of its major service providers. Based on information
available to management, the Partnership's major customers and vendors
are taking steps that they believe are reasonably designed to address
the Year 2000 Issue with respect to computer systems that they use. At
this time, however, there can be no assurance that these steps will be
sufficient, and the failure of a timely completion of all necessary
procedures could have a material adverse effect on the Company's
operations. Management will continue to monitor the status of, and its
exposure to, this issue.
-11-
<PAGE>
SUPPLEMENTARY INFORMATION
-12-
<PAGE>
<TABLE>
TMP INLAND EMPIRE VII, LTD
(A California Limited Partnership)
Schedule II - Real Estate and Accumulated Depreciation
(Schedule XI, Rule 12-28, for SEC Reporting Purposes)
For the Year Ended December 31, 1998
<CAPTION>
COLUMN A B C D E F G H I
- ------------------------------------------------------------------------------------------------------------------------------------
COSTS CAPITALIZED
SUBSEQUENT Gross
TO ACQUISITION amount at Estimated
Initial Carrying which Carried Accumulated Date of Date Depreciable
Description of Assets Encumbrances Cost Improvement Cost at Year-End Depreciation Construction Acquired Life
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unimproved land -
Perris CA -0- $1,859,244 -0- $ 211,084 $2,070,328 -0- n/a 2/21/91 n/a
Unimproved land -
Victorville, CA -0- 1,937,240 -0- 243,040 2,180,280 -0- n/a 11/13/90 n/a
Unimproved land -
Adelanto, CA -0- 451,137 -0- 58,159 509,296 -0- n/a 12/3/90 n/a
Unimproved land -
Victorville, CA -0- 2,003,109 236,116 368,991 2,608,216 -0- n/a 7/2/91 n/a
Unimproved land -
Perris, CA -0- 672,441 -0- 213,970 886,411 -0- n/a 8/25/92 n/a
--- ------- -------- ---------- --------- ---
$ -0- $6,923,171 $236,116 $1,095,244 $8,254,531 -0-
==== ========== ========= ========== ========== ===
Less valuation
allowance: (5,663,822)
----------
Net carrying value $2,590,709
==========
Reconciliation of
carrying amount
Beginning balance $2,414,401
Additions
Carrying Costs $176,308
Total Additions 176,308
Total Deductions -0-
----------
Ending balance $2,590,709
==========
</TABLE>
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: APRIL 15, 1999
----------------------
TMP Inland Empire VII, Ltd.
A California Limited Partnership
By: TMP Investments, Inc., a California Corporation as
Co-General Partner
By: /S/ WILLIAM O PASSO
-------------------------------------
William O. Passo, President
By: /S/ ANTHONY W THOMPSON
-------------------------------------
Anthony W. Thompson, Exec. VP
By: TMP Properties, a California General
Partnership as Co-General Partner
By: /S/ WILLIAM O PASSO
-------------------------------------
William O. Passo, General Partner
By: /S/ ANTHONY W THOMPSON
-------------------------------------
Anthony W. Thompson, General Partner
By: /S/ SCOTT E MCDANIEL
-------------------------------------
Scott E. McDaniel, General Partner
23
